Monthly Archives: February 2017

As the landscape of education changes & most schools become self-managing academies, the future funding of education is set to be increasingly challenging.

With the announcement, prior to Christmas, of the potential required cuts to the school’s budget of £3bn by 2020 is it time for a fresh look at how schools operate financially?

With most long established institutions, the ability to change and examine new ways of operating is a challenge.  With the landscape of education changing whereby most schools will be academies and therefore self-managing, compounds this challenge.

As today’s report states, approximately 60% of secondary schools will be or are currently operating in deficit, there is a radical change needed to manage the operating expenses of any school.  Worryingly the call seems to be from the sector is that this will result in staff cuts.  Whilst it is inevitable that some staff cuts will take place due to the size of the required cuts there could be other areas of opportunity that can be realised.

Having worked with a variety of schools and institutions we are often faced with a reluctance of “changing from what we have always done”.  The reliance on existing recognised buying clubs and council run procurement activity has not produced the required savings or efficiencies that schools require to meet the future demands of expenditure cuts.

Whilst dealing with some schools that are open to change, we have been able to use our experience from other sectors in how we have optimised operating costs. Whilst commercial businesses recognise the need for outside expertise, the school’s environment seems reluctant to accept this.

Suppliers are keen to work in the education environment but are often prohibited due to the use of framework agreements or OJEU.  Therefore, the availability of alternative sources of supply and a challenge to existing costs may be limited again making the challenge of cutting costs difficult.

Commercial businesses have long faced the challenge of ensuring costs are comparable to income and it could be argued (as I have on previous blogs) that schools must now operate in a similar manner.  This and, I believe, any future government need to balance the fiscal budget and therefore this challenge will not diminish but will increase.  Schools need to look at new ways of operating and explore services that are outside of the existing ones that have been used. As a wise man once said;

“If you always do what you’ve always done, you will always get what you’ve always got” in the case of schools this could be a £3bn budget gap.

Acquiring or merging businesses has a multitude of benefits and is often a mark of success and growth.

However, some of the opportunities that arise from this process are often not capitalised on due to the intensity of the process and the need to merge cultures, people and processes.

During this time the benefits from the larger entity need to be identified to ensure that any financial growth is realised.  Quite often the increased sales revenues are not returned directly to the profit line due to inefficiencies in ordering, pricing or process.  Existing suppliers need to be brought into any transition where additional efficiencies can be realised together and a better margin achieved for all parties.

This process can also be an opportune moment to review existing suppliers and most importantly their service levels.  Whilst contracts may be prohibited from being terminated, leverage can be used to achieve a better level of service or indeed price. Supplier are often keen to work with a growing business as it cements relationships but also business continuity for their own supply chain.

By understanding the suppliers cost base and the efficiencies they can make through logistics, administration, marketing and sales support can be utilised to drive a reduction in cost to the end business.  These savings can be multiplied along the supply chain to all suppliers and discounts can be moved to a new level.

Pressure to deliver a return on any investment is never keener than at this time of any businesses life and examination of the cost lines should be undertaken at this time.  It is the norm that financing has been used to make any acquisition or merger take place.  Unforeseen costs such as redundancy, implementation of new processes and a normal downturn in production can all be by products of any merger / acquisition.

Balancing all these financial demands can reduce staff motivation and a downturn in business can occur whilst at the same time needing a instant return on any investment is required.

Bringing in expertise would deliver benefits and assist in achieving a quick return allowing a business to focus on increasing sales revenue and cultural integration.


As we have seen forecasting the future has come to be an art rather than a science, … and an art without too much accuracy.

You only need look at the performance of recent polls for the past elections and of course the numerous differing predictions of the economy’s performance following Brexit.

Only last week I reflected on the predictions of the bank of England predicting challenging issues for the economy and now we have PWC predicting that Brexit will have little effect on the economy and it may produce a positive long term future.

What do we know for sure?

Well we can be sure that businesses will adapt to trading conditions and the strong will survive and the weak (maybe maybe not) but that’s not unusual in any trading environment.

In any case I think that businesses should be examining the pillars of any business.  That’s not to say these are the finite ones but it’s a good start

People – have you got the right people in the right place.  Do you need to recruit or can you outsource and bring in short term expertise to give the business an injection or kick start?

Sales – How do you improve the sales from your existing customer base, how do you get more customers

Costs – how much does it cost to run the business, what are your minimum costs for just producing selling one item, when did you last actively engage with your suppliers

Competition – how are they doing, can you learn lessons from them, how do they do what they do

Most would argue that this should happen throughout the business cycle ad I dare say it does to a greater or lesser extent but is it always done by the same people internally and surprisingly no change is made.

Using someone who doesn’t have a vested interest in not upsetting the boss / board / shareholders / colleagues is probably a better bet and so would recommend thinking about who would do the review first – should they be internal or external

How do you prepare your business to face this year’s ‘perfect storm’?

The Bank of England has warned households to expect sharp rise in inflation this year.

In terms of business challenges, is this the making of a ‘perfect storm’ – Brexit, rising inflation, government budget cuts, less consumer spending, sterling falling in value, a drop in manufacturing output and now the announcements  from the new US President of policies promoting an ‘America First’ agenda.

Rather than waiting for this to happen shouldn’t we all as business people look at how we operate and the cost of operation.  By ensuring that our cost base is as best we can then the business challenges of maintaining profit is made easier. By examining our supplier base not only in terms of robustness but also cost and country of origin should be the focus of all forward-thinking businesses.

How can businesses best undertake this review?  It could be argued that businesses as part of their natural businesses cycle would do this.  But do they have the time or the knowledge of what is available?  You don’t know what you don’t know.

I am constantly surprised that businesses don’t take this decision and constantly rely on traditional approaches to procurement.  Asking for help is not a weakness but I believe a strength of a good business.  If this comes at no cost, then it is a duty of all managers to seek outside advise and can strengthen the approach to the future

By using external advice with knowledge of different markets businesses can ensure that they are best placed to face the ever-mounting business challenges of remaining profitable in these uncertain but exciting times.

When it comes to business, asking for help isn’t a weakness. It can end up being a pretty smart business move.

Contact us for further details on reducing your business costs.

Whilst discussions around the government’s plans for total academy conversion for English schools in England have mainly focused around teaching standards, another key factor in their ultimate success will be whether academies can survive financially once they have total control of their budgets.

This is the view of leading business cost solutions specialists PES Business Ltd who have worked with a number of academies around the country.

Unlike the traditional LEA led schools model where pupil intake was determined by the local authority and there was little or no competition between schools, now that academies have the opportunity to determine the number of pupils they accept, those academies who are not as popular could well face reductions in their income.

The effective management of an academies’ income and accompanying expenditure can impact on the level of teaching resources available for pupils and will ultimately decide the survival of some academies.

Previously school’s expenditure levels were heavily influenced by their local council or by approved buying groups who would procure goods and services on their behalf. Now that future academies can determine their own procurement strategy, the emphasis is on how well the decision makers within the academies make these financial decisions.

Neville Snell, director of profit improvement at PES Business comments; “As Headmasters now become CEOs and Accounting Officers for these academies (effectively companies) it is clear that many academies lack the right skills or knowledge to best determine the large buying decisions that they make, and fulfil their duty to provide best value for any level of expenditure incurred.

“We have seen many examples of where a reliance by an academy on using incumbent buying groups or local council procurement instead of undertaking a full review of alternative sources of advice, has led to purchasing decisions which have turned out to be costlier than necessary for the academy.”

Amongst their clients PES Business have worked with a high performing secondary school in southern England that converted to an Academy. The Academy were facing increasing utilities costs but lacked the necessary procurement experience and expertise, and so brought PES Business in to help review current contracts due for renewal and implement a new procurement strategy.

As a result savings of 26% were made on a single gas supply contract and further significant savings identified on their telecoms spend plus future janitorial and business supplies contracts.

Neville adds; “As academies are required to operate more like businesses, their accountability has to be more like a business with a clear, transparent use of skills and knowledge available. Businesses are used to using outsourced expertise to provide a service with a higher level of knowledge and awareness of the markets, but at a fraction of the cost.

“Academies need to ensure financial propriety and ultimately financial survival, and so the markets that academies can access for their procurement requirements should not be limited to “education industry” experts. Rather best practice should dictate using alternative supply channels to secure the best value for money and not just settling for ‘more of the same’”.

Whatever decisions are made by the management of the academies, the ultimate winners or losers will be the pupils who will either benefit from the additional resources available for learning through good income and expenditure management or conversely lose out from a reduction in these resources.